Wheat production, consumption and ending stocks for the world as well as selected countries are depicted in the following graphical illustrations:
Figure 1: World production, consumption and ending stocks, 1998/99-2002/03
Figure 2: US production, consumption and ending stocks, 1998/99-2002/03
Fig 3: EU production consumption and ending stocks, 1998/99-2002/03
Production
World
production for 2002/03 is expected to be 9,4 million tons or 1,6% less than the
578.8 million tons produced in 2001/02.
Consumption
Global
consumption for 2002/03 is estimated to be 10,3 million tons or 1,8% higher than
584,8 million tons consumption in 2001/02.
Ending stocks
Global
ending stocks for 2002/03 are forecasted to decrease by 25,8 million tons to
172,4 million tons, the lowest level since 1996/97.World stocks are limited and
this might have a positive effect on world prices in the coming months.
World wheat trade
The USDA forecasts that world wheat trade will amount to 102,6 million tons in 2002/03. This figure is 7,1 million tons (6,5%) less than world wheat trade in 2001/03. This forecast is 2.6 million tons higher than last month’s forecast and is mainly due to increased exports from China, Russia, Ukraine and Eastern Europe. Australian exports are, however, lower than the previous forecast.
THE WHEAT SITUATION IN SOUTH AFRICA
Production
Wheat
is currently being harvested in the Western Cape and wheat quality is looking
good. However, the crop in the eastern Free State is in the critical flowering
stage and drought and heat stress are causing damage, lowering expectations of a
good crop. The current dry spell and high temperatures are also affecting other
wheat producing areas in the northern parts of the country. According to the
fourth crop estimates committee production forecast, the expected commercial
wheat crop was decreased by 10 700 tons or 0,5%, from 2,292 million to
2,282 million tons.
Consumption
Local wheat consumption is currently decreasing. One of the reasons for the decline is the current problem with high food prices, which is still headline news. Millers and bakers are currently adopting a wait and see strategy in anticipation of a decline in local wheat prices. The import tariff on wheat has been totally withdrawn on the 23rd of September 2002, which means that wheat can now be imported duty free. Kazakstan is currently exporting 100 000 tons to South Africa. The average consumption of wheat in South Africa is 2,645 million tons.
Recent
regulations published in the Government Gazette require that all maize meal and
bread flour milled in South Africa should contain specified amounts of iron,
zinc and several vitamins to counteract a range of micro-nutrient deficiencies.
The new regulations can help reduce the current large quantities of imported
wheat due to the poor quality of the wheat.
Stock levels
Local stock levels are still satisfactory for local demand. The quality of stock levels is also on standard. The constant inflow of imported wheat is keeping stocks on a high level.
South
African production, consumption and ending stocks are illustrated in figure 4.
Fig 4: RSA production, consumption and ending stocks, 1998/99-2002/03
Prices
The current tight stock situation in the world is creating some confusion in the market. Prices of most commodities are trading lower despite low stock levels and low production.
Figure
5 illustrates the daily movement of the US gulf price for number-1-hard red
wheat from February to November. It’s clear that there’s general upward
trend up to September when the price starts to move sideways. The price reached
a low level on 13 November after the USDA’s release of the latest world wheat
supply and demand figures on 12 November. The decline in the price is somewhat
confusing if one considers that the report clearly indicates that current world
stock levels are tight and that supply is running low. A possible reason for the
sharp decline in the price level might be that most role-players did not
anticipate the important role of Chinese wheat in the world market. The USDA
report states that Chinese export forecasts have increased by 500 000 tons
from last months forecast of 1 million tons to 1,5 million tons. Increased
exports from the former Soviet Union might also be responsible for the drop in
the price of wheat. However, the downward trend in price can lead to an increase
in demand, which could quickly reverse the situation and we could end up with
high wheat prices.
Local price trends
Local wheat prices have also been on a downward trend during the last month. This is despite of crop damage in the eastern Free State as a result of heat and drought stress. The current strengthening of the Rand against the US$ is pushing import parity down. This together with imports of lower quality wheat and declining international prices, lead to a decrease in the local wheat price. Harvesting is currently in progress in the Western Cape and it seems that they will have a good crop and good quality. Local consumption is currently on a downward trend as the current problem of high food prices is still very much a public concern.
Price trends in the SAFEX December 2002 futures price are illustrated in figure 6. This figure shows that there is a current downward trend in the December 2002 futures price
Another interesting point is when one compares the price of white maize against the price of wheat. Wheat is currently cheaper than white maize. This could result in an increase in demand for wheat, as wheat can to some extent be a substitute for maize.
Fig 6: SAFEX prices for white maize and wheat, 10/11/02-11/14/02
Compiled by Walter Moldenhauer
